Our regularly updated perspective on the pandemic’s impact across nine industries, actions leaders should take and questions to push your thinking.

The global spread of COVID-19 is impacting all industries in all directions. While headlines surround customer uncertainty and the visible disruption of production and supply chains, we believe organizations face greater risks and challenges when it comes to their people and crisis management. And even after COVID-19 is under control, companies will face an uncertain financial, regulatory and legal aftermath.

So, how should leaders respond to the unprecedented disruption caused by the COVID-19 pandemic? Here we break down the impact on nine key industries, actions organizations can undertake, and questions to help push your thinking. Some of these are broadly applicable, such as whether you have the contingencies to cope with sustained disruption, or the operational visibility to fully understand where and how you need to act.

You also should take into account the fast-moving nature of government responses to the crisis, which already include everything from offering grants and low-interest loans to companies, to taking equity stakes and directly supporting industries. Finally, while we believe all leaders can learn from the experience of others during this volatile time, you can skip directly to your relevant industry by selecting the applicable link below:

Advanced manufacturing and mobility

The industry faces disrupted supply chains and a significant drop in consumer demand.

From end-user demand to supply-chain disruptions and plant closures, companies in each of these sectors are facing monumental COVID-19 impacts. The automotive sector is facing significant disruption in production, global supply chain and customer demand – everything from a dramatic drop in new vehicle sales in China to supply-chain stoppages and plant closures.

Industrial-products and chemical-products companies are facing deferred demand, supply disruptions and potential plant closures, dramatically impacting retail and purchasing prices. Finally, airlines and transportation companies globally are severely impacted by the significant drop in demand for freight and passenger transport, as well as the cancellation of events.

Actions you can take

Global production and supply chain disruption

As your business continuity plans take effect, keep assessing the impact on your supply chain and operations

Consumer

The seismic changes reshaping consumer industries have accelerated and will have lasting impact on the way people shop and what they buy.

In the short term, the global spread of COVID-19 has led to a third of consumers experiencing some sort of lockdown, and significant supply and demand volatility. Consumer staples companies are struggling to keep up with demand from panic buying, but non-essential stores are closing either voluntarily or due to containment measures which have disrupted supply chains, production, and consumption. Digital channels are backing up as fulfillment and replenishment for spiking demand tests existing capabilities.

Companies are pivoting to ensure the supply of essentials while suspending activities for discretionary goods. Many are increasingly having to balance liquidity needs with the physical and financial well-being of employees, while also navigating emergency regulation and proactively building brand integrity by being part of the solution.

Actions you can take

Maintain liquidity and cash flow

Draw down available lines of credit to ensure continuity during volatility

Tap into available government or trade stimulus measures and incentives

Freeze capital expenditure and reallocate funds to where they are needed

Manage workforce needs carefully

Ensure best practice in communicating with and financially supporting furloughed staff

Responding to COVID-19

Energy and resources

Companies must prepare for a period of intense disruption and increased risks.

Energy groups have been squeezed by a big drop in demand for both oil and natural gas stemming from the outbreak of COVID-19, which has led to lockdowns, a collapse in industrial activity and travel bans all over the world. Oil prices have been sent crashing to their lowest level since 2001, while gas demand has fallen by as much as 20% in some cases. Mineral and metals demand forecasts have been revised downward based on the impact on the Chinese economy, and the global spread will only broaden and deepen those impacts.

Regional power markets are increasingly at risk of prolonged demand destruction and there are heightened liquidity fears, especially for energy retailers. With events fast-moving and widespread, energy and resource companies should consider how best to respond to these challenges now, which actions to put in place over the near term and how to plan for recovery over the long term.

Actions you can take

Prioritize people safety and continuous engagement

Follow government advice regarding best practice around cleaning and social distancing

Employees critical to maintaining critical assets and services need to have access to personal protective equipment and be kept safe through regular health screening

Build resilience in preparation for the new normal

Review and renew business continuity plans as new strategies are solidified. Planning for future contingencies based on risk intelligence scenario planning and modeling is critical given the unknown duration and impact of the crisis

Establish lessons learnt from an increased proportion of the workforce working from home. This could create opportunities and increase future resilience

Questions you should ask

What interim policies are required to protect reliability, safety, security, and employee well-being?

Related content

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4

Chapter 4

Financial services

Financial-market volatility and a looming global recession are amplifying impact.

We’ve already seen the market volatility sparked by COVID-19 and forecasts of its likely worldwide economic impact, weakening investment returns and potentially adversely affecting the capital position of financial institutions. A sustained economic slowdown triggered by the outbreak will also put negative pressure on revenue and lead to a material increase in credit risk and a potential spike in claims including for health, credit and event cancellation insurance.

Navigating this challenging environment requires financial services firms focus on better communication, enhanced consumer relationships and acting more transparently with customers and investors. Over the short term, we see support for a shift toward online distribution and testing business continuity policies; over the longer term, firms should introduce comprehensive enterprise and cyber resilience models to prepare, sense and respond to disruption.

Actions you can take

Stakeholder health and safety

Communicate health and safety priorities to personnel

Discuss alternative customer trust and engagement priorities in the event of disrupted channels

Financial risk exposure

Assess liquidity and capital impact on own business and clients due to market volatility, credit impairment, and a potential global economic downturn; assess forbearance impacts, and understand accounting implications

How EY can help

Government and public sector

Policymakers have a clear mission: protecting the lives and livelihoods of citizens.

Governments and public-sector organizations are at the frontline of responding to COVID-19. They face three urgent tasks. First, preserving life by limiting contagion and building capacity and supplies in health services. Second, protecting people’s livelihoods by taking action to subsidise wages, support business and facilitate rent, mortgage and other repayment holidays. Third, maintaining vital public services such as social care and education. Keeping supermarkets stocked and scientific research for vaccines and testing are other key priorities that government can help facilitate.

Once the immediate crisis has passed, attention will focus on how policymakers can help revive economies that has gone into deep freeze, while at the same time repairing fiscal positions that will be damaged significantly by the economic rescue packages now being implemented. With international debt levels at the highest in 50 years and interest rates at record lows, governments have fewer monetary and fiscal policy instruments to stabilize the global economy. This will constrain future spending, while simultaneously increasing demand for government services. As a result, transformation programs to make government more effective and efficient will become even more urgent.

Actions you can take

Significant global economic downturn

Optimizing budgets

Supporting the end-to end realignment of services and restructuring of government

Prioritizing technologies to upgrade procurement management

Economic fragility and targeted stimulus measures

Conduct a risk analysis to assess public health and economic vulnerabilities

Evaluate stimulus measures for rapid recovery

Identify policies to build resiliency and absorb negative shocks over the medium- and long-term

Increased citizen vulnerability and demand for services

Use predictive analytics to prioritize service delivery to populations most at risk

Strained crisis management resources

Questions you should ask

Do you have robust and accurate data on which to base decisions on how best to respond to the emergency? If not, could you build communication channels enabling people to tell government they are in need of help?

Do your ministries/departments/agencies need help to facilitate remote working?

Are the financial support measures you have announced reaching the citizens and businesses that need help?

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Chapter 6

Real estate, hospitality and construction

Hospitality and tourism have seen the most significant impact from COVID-19 with an almost complete shut-down in activity and bookings in many countries. However, tentative signs of recovery are however beginning to emerge in China. The construction sector has been hit by an inconsistent response to site closures and significant supply chain disruption leading to delays which are both expensive and challenging to manage. Real-estate buildings are either closed (such as retail malls and offices) or accommodating extremely high levels of use (such as residential, care homes and food distribution). Access to capital remains a priority and volatile market conditions are particularly challenging. Engagement and communication with financial counterparties and investors is critical, as are government initiatives to ensure the ongoing provision of capital.

The severity of the economic downturn and unprecedented disruption to consumer activity will impact all sectors this year with many companies having already withdrawn guidance. Demand shocks will have a significant negative impact in the near-term, but the longer-term consequence is likely to be an acceleration in the transformation of how people live, work and shop with important implications for how they use the built environment.

Actions you can take

Global disruption to business and supply chains

Validate business plans to incorporate crisis response and business preservation concerns

How EY can help

Employers are reinventing the workplace environment not only to minimize costs, but to address changing generational behaviors and overall productivity, and to address the needs of today’s modern workforce.

Health sciences and wellness

The industry is straining to cope with incoming demand and critical shortages.

Health systems and life-sciences companies face challenges on two fronts: preventing the spread of COVID-19 while caring for those affected with the virus or ill with other conditions, and managing business continuity issues, including both workforce health and supply-chain disruptions. With community transmission of COVID-19 widespread, life-sciences companies must address potential disruptions to the supply chain, including delays in ongoing or new clinical trials as health systems prioritize treating coronavirus patients. Current high stock levels of routine medicines and manufacture of branded products outside China have blunted shortages of most drugs and devices, though shortages of medical equipment (e.g., ventilators, masks) exist and shortages of generics are possible. To reduce the demand for critical care and improve outcomes, health systems and governments need to take steps to slow COVID-19’s spread, reduce the surge in demand, enable access, expand testing and tailor isolation solutions.

Health systems must also cope with multiple business continuity issues, including shortages of staff and essential testing, protective and treatment equipment. Beyond medical equipment, supply chains for medicines, devices and blood products have been disrupted. In addition, providers must still deliver essential non–COVID-19 health care while simultaneously responding to the crisis. Increased expenditures linked to testing, hospitalizations and support for vulnerable individuals will affect payers and government.

Disruptions to cash flow and liquidity

Create contingencies for defaults among product suppliers or distributors

Questions you should ask

How will I preserve system integrity and continue to serve?

How will I keep core business processes at optimal levels?

How can I make my supply chain more resilient?

How does my business change with more flexible regulations?

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Chapter 8

Private equity

The industry must manage portfolios while assessing the potential impact on fundraising and new deals.

With more than US$3.4t in assets under management, ownership of companies across a wide range of industries, and more than 20m people employed across the world, private equity (PE) will run the full gamut of effects from COVID-19. For most funds, tackling thorny issues at the portfolio level is the first priority. PE firms have been preparing for a potential economic downturn for the past 2-3 years with significant EBITDA declines already modeled into most deals.

Firms are setting up crisis management teams, working to understand supply chain issues across the portfolio, and working to ensure sufficient liquidity. However, as logjams in the deal market resolve in coming months, PE will focus on deploying the approximately US$750b in dry powder available to fund new deals. Firms are taking a number of steps to respond to the outbreak, including limiting travel, adding pandemic-related language to new deal and fundraising documents, and deploying additional operating resources to work closely with firms in functions like supply chain. We see fundraising potentially impacted over the near term as travel restrictions prevent limited partners from finalizing diligence.

Uncertainty of impact across the portfolio

Questions you should ask

How vulnerable is our portfolio to disruptions to our supply chain, human capital, or liquidity?

What’s our deployment strategy as volatility increases?

What contingencies do we have in place for sourcing and diligence?

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9

Chapter 9

Technology, media and entertainment, telecommunications

Businesses are rising to the challenge of increased demand by providing critical infrastructure and services in unprecedented times.

Around the world, as lockdown becomes a reality for many, the number of people working remotely and the amount of leisure time spent in the home have both reached new levels. It means the TMT sector is experiencing unprecedented demand. Not only is there a spike in the use of existing services, but consumers are embracing new technologies and changing their behaviours. Television consumption has risen significantly since the lockdown and is proving to be a catalyst for the adoption of streaming video services.

News is a key driver of demand for content but, in the absence of sport and live events, other genres, such as movies and drama, as well as gaming, are all experiencing an increase. At the same time, there’s a spike in demand for connectivity and communications, for both business and personal use. Video conferencing apps are being downloaded in record numbers, previously physical activities are shifting online at pace and network traffic is rising as consumers adapt to new realities and adopt new behaviours.

Managing these heightened levels of demand presents challenges in the technology and telecommunications sectors. There is increased demand for network capacity but also pressure on other areas of their business, from supply chain and customer service to data protection and workforce well-being. As a result, telcos are carefully monitoring network resilience while adapting pricing plans and usage limits to ensure access and affordability. In collaboration with telcos, streaming companies have committed to reducing their output quality from high to standard definition to limit their bandwidth needs and ensure continuity of service.

Despite the increasing demand for their services there are pressures on all TMT businesses, not least working capital and cash management. As an example, a fall-off in advertising expenditure by key sectors such as travel, consumer goods and sports is impacting the liquidity of many media businesses which rely on advertising revenue. Companies across TMT need to reforecast their working capital models and think of new forms of cash pooling. They’re also working with regulators and stakeholders on options to defer tax obligations, upcoming debt covenants and ultimately seek net operating loss carry-back opportunities.

Additionally, many companies, particularly those that rely on live events that have been cancelled or deferred (such as concerts, film releases and software-user conferences) are reviewing the impact on revenue, income, and ultimately their sales pipeline. They are also assessing potential impairment issues relating to business once the impact of the crisis is understood and the recovery underway.

People measures and restrictions

Support frontline staff and government-identified key workers (e.g. field technicians, network engineers) with new protocols, tools and capabilities

Test and implement new technologies/remote collaboration platforms while the COVID-19 pandemic persists

Explore and implement managed services to allow companies to focus on core activities

Questions you should ask

Do we have a full global view of the COVID-19 tax incentives and stimulus packages that are available?

Can we work with technology and ecosystem partners to quickly understand how our markets have changed, and adapt to those new dynamics and risks? Do we have the tools and models to develop new supply chain, cash, revenue, and cost models?

Are we considering all of the physical and cyber security threats our company and people are exposed to?

Contact us for immediate support

Summary

How should leaders respond to the unprecedented disruption of the COVID-19 pandemic? Here we breakdown the impact on nine key industries, actions organizations can undertake, and questions to help push your thinking.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com.

This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice.

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